Trading Strategies: From SOES Bandits to 2013

John O'Donnell is the chief knowledge officer of Online Trading Academy and has seen traders and their successes and failures from before the dot-com boom through today. In this interview, we talk with John about the characteristics successful traders share and those that fail. We discuss how trading strategies have changed since the days of wide bid/ask margins and how traders are making money in today's markets. We also discuss the education of traders and his thoughts on the best way to learn how to trade from scratch.

Tim Bourquin: Hello everybody and thanks for joining me for another interview today. My guest today is John O’Donnell. He is the chief knowledge officer of Online Training Academy. John and I go way back. He was one of the very first members of our day trading group in Orange County back in 1997, I think it was John. I don’t know how much time has passed since then. I don’t know how that could be. It seems like it was just yesterday.

John O’Donnell: I remember us meeting with the likes of Tony Oz at Hof’s Hut, and of course, you went on to build that into the Trading Expo industry, and Online Trading Academy, if I recall, was one of the first sponsors of that particular event for you and your partners.

Tim Bourquin: Yes, right!

John O’Donnell: And you know, so, yeah, that brings back a lot of memories. As a matter of fact, occasionally I drive over to that area and they’ve torn down Hof’s Hut.

Tim Bourquin: Oh, no.

John O’Donnell: Our landmark is no longer there.

Tim Bourquin: It’s even part of my introduction video on another site, Trader Interviews. I talk about the sausage at Hof’s Hut, and that’s the reason I had the first meetings there.

John O’Donnell: I think when I first showed up, there might have been maybe seven or eight people sitting around, you know, telling lies to one another and it was a great place to start.

Tim Bourquin: Right. I mean I think back then it was a lot of those traders still, you know, people were doing scalping in and out every day like crazy. It’s changed quite a bit since then. Did you see it changing or did you have any idea where we’d end up today?

John O’Donnell: Well you know, Eyal Shahar founded Online Trading Academy in July, actually we found it as Block Trading in July of ’97. I joined him in January of ’98 and we were day trading “SOES bandits” firm here across the street from UC Irvine, which eventually grew into 150 traders executing about $500M a day of trades. An offshoot of all that, of course, was Online Trading Academy was created literally on the floor of that firm.

Our conversations originally (Eyal, the founder and mine) is that day trading and SOES trading the ability to step in front of the market makers and narrow spreads would grow, that it was a better mouse trap. What we didn’t envision there would be cheap, affordable bandwidth would come to the home so fast. You know, you had to come to a trading floor like that. Remember those were the days of 56K modems had just been released.

But our vision of the future in those days was that the world eventually—markets would eventually trade 24/7. We didn’t know at the time that the school was going to become of the dominance of our business model. We thought we were going to build a better mousetrap and let the public come in and have a flatter, fair playing field against Wall Street professionals. The school was designed to keep the floor full of traders and, of course, we closed the floors, sold it two weeks before 9/11 and converted our model to what it’s become today and we’re the largest trading school in the world today with 35 centers spread across seven countries.